Fee policy 2015/2016

Introduction

This page explains the practising fees and Compensation Fund contributions structure for the practising year 2015/16. The fee structure is broadly the same as in previous years.

What are mandatory practising fees?

Our powers to charge fees are mainly contained in the Solicitors Act 1974 and the Administration of Justice Act 1975, as amended by the Legal Services Act 2007. Our powers to set fees for alternative business structures (ABS) are contained in the Legal Services Act 2007.

The majority of our funding comes from annual fees set each year.

We can charge annual fees to individuals (e.g. practising certificate fee) as well as to firms (recognised sole practitioners, recognised bodies, and licensed bodies). These are mandatory and must be paid in order for individuals and firms to maintain their authorisation to practise.

The same statutes also require us to provide a Compensation Fund and to seek contributions from individuals and firms to meet the cost of claims and running the Fund.

What are the total funding requirements for this year?

The net total regulatory funding requirement for 2015/16 is £105.8m, a slight increase on the £104.9m collected last year.

Additionally, we will collect approximately £8.5m for the Compensation Fund. This compares to £8.4m last year.

Further information on the budgets and the way these figures have been derived is available on the Law Society website.

The following table and charts show the total practising fee income split by expenditure category, comparing 2014/15 and 2015/16.

Practising fee income split by expenditure

Solicitors Regulation Authority

The Law Society

Legal Ombudsman/Legal Services Board

Solicitors Disciplinary Tribunal

Provision

2014/2015

50%

30%

17%

3%

0%

2015/2016

51%

33%

13%

3%

0%

Practising fees and Compensation Fund contributions for 2015/16

A. Individual practising certificate (PC) fee

A flat fee payable by every solicitor seeking a practising certificate (PC) and every registered European lawyer (REL) and registered foreign lawyer (RFL) seeking to register.

The practising fee for individuals is as follows:

Practicing fee for individuals

1 November 2015 to 31 December 2015 inclusive

1 January 2016 to 31 March 2016 inclusive

1 April 2016 to 30 June 2016 inclusive

1 July 2016 to 31 October 2016 inclusive

£320

£252

£184

£116

All above fees include an application handling fee of £48.00. Date ranges quoted apply to date the PC is issued.

There are reduced fees for maternity leave as follows:

Reduced fees for maternity leave

1 November 2015 to 31 December 2015 inclusive

1 January 2016 to 31 March 2016 inclusive

1 April 2016 to 30 June 2016 inclusive

1 July 2016 to 31 October 2016 inclusive

£184

£150

£116

£82

All above fees include an application handling fee of £48.00. Date ranges quoted apply to date the PC is issued.

RFLs based mainly outside England and Wales will pay a reduced registration fee of £100.00.

B. Firm fee

A fee payable by every firm seeking or maintaining authorisation to practise

Due to recent legislative and regulatory changes, sole practitioners are no longer required to renew authorisation to practise on an annual basis.

From 1 November 2015 recognised sole practitioners' practices will become recognised sole practices. Recognised sole practitioners renewing their practising certificates for the practising year 2015/16 will be asked to confirm that they wish to continue to practise as sole practitioners and that they wish their practices to be treated as recognised sole practices. They will also be required to pay a firm fee as part of the fee for their practising certificate. Recognised bodies and licensed bodies are required to pay annual periodical firm fees by the prescribed date.

The firm fee will be calculated based on the firm's turnover (the definition of turnover is set out in Appendix 1). The following banded turnover table is used to calculate each firm's fee. Please note that £100.00 is the charge for handling the application which is included in the fees below.

Calculation of turnover

Turnover range (A)

Pay per cent* of turnover within band (B)

Minimum turnover in band (C)

Minimum fee in band (D)

£0 - £19,999

0.80%

£0

£100

£20,000 - £149,999

0.47%

£20,000

£260

£150,000 - £499,999

0.46%

£150,000

£871

£500,000 - £999,999

0.44%

£500,000

£2,481

£1,000,000 - £2,999,999

0.42%

£1,000,000

£4,681

£3,000,000 - £9,999,999

0.29%

£3,000,000

£13,081

£10,000,000 - £29,999,999

0.24%

£10,000,000

£33,381

£30,000,000 - £69,999,999

0.22%

£30,000,000

£81,381

£70,000,000 -£149,999,999

0.20%

£70,000,000

£169,381

£150,000,000 - £9,999,999,999

0.07%

£150,000,000

£329,381

* per cent is equivalent to "divided by 100" (e.g. 0.65% = 0.0065)

Using the table above to calculate the firm fee based on the firm's turnover (T) as defined in Appendices 1 and 2:

Identify which band the turnover (T) falls in from column A.

Subtract the figure in the corresponding column C from (T).

Multiply this figure by the corresponding percentage in column B.

Finally add this figure to the corresponding figure in column D.

Firm fee then needs to be rounded to the nearest pound (i.e. if less than 50p then round down and if equal to or more than 50p then round up).

Example 4: For Turnover of £279,123,528:

For a brand new firm which is a recognised body or recognised sole practice

The firm fee due at initial application for recognised bodies and recognised sole practices is as follows. Please note that £200 is the charge for handling the initial application which is included in the fees below.

Fee due at initial application for recognised body or recognised sole practice

1 November 2015 to 31 December 2015 inclusive

1 January 2016 to 31 March 2016 inclusive

1 April 2016 to 30 June 2016 inclusive

1 July 2016 to 31 October 2016 inclusive

£1,000

£800

£600

£400

The firm's first periodical fee is based on the first 12 months of the firm's turnover and can be estimated where appropriate.

For a new recognised body or recognised sole practice which is a successor practice

The firm fee at initial application is £200. This fee applies only where the predecessor/previous firm has paid a firm fee for the current practising year. If no such fee has been paid then the fee for the initial application will be based on its successor turnover.

In the event of successor practice(s) being unable to agree on the apportionment of turnover from the predecessor/previous firm(s), then the SRA will treat the notice of succession as an application for it to determine the turnover figures for the purpose of determining renewal or periodical fees. In such a case, a fee of £250 for SRA determining the apportioning of fees will apply.

For a new licensed body

The application fee payable by a body applying for initial authorisation as a licensed body will be calculated as follows:

An initial payment of £2,000, which is based on a day rate of £600, and includes a contribution towards the setting up of the appellate body;

£150 in relation to each candidate subject to approval by the SRA under Part 4 of the Authorisation Rules, excluding those deemed to be approved under Rule 13.2 of the Authorisation Rules;

Where the SRA's costs in considering the application exceed the amounts specified in (a) and (b) above, then such additional costs will be charged at a day rate of £600;

Where the nature of the application means that the SRA has to seek external assistance, the full cost of that assistance will be charged;

On initially considering an application, the SRA will notify those bodies whose applications it considers likely to exceed the amounts specified in (a) and (b) above, and will indicate any additional sums payable in accordance with paragraphs (c) or (d) above;

Notwithstanding any additional sums notified under paragraph (e), the SRA may charge further additional sums in accordance with paragraph (c) or (d) if unforeseen circumstances arise during the application process, however, the SRA shall notify the applicant as soon as reasonably practical as to the further liability to be incurred.

Licensed bodies are also required to pay an initial periodical fee on authorisation, which is calculated by reference to the firm’s estimated turnover (using the banding described in section B), paying one twelfth of that amount in relation to each month or part of a month between the date of authorisation and 31 October 2016.

For a licensed body which is a successor practice

Where a licensed body has succeeded to the whole of the practice of a recognised sole practice or recognised body the fee calculated shall be reduced by one twelfth of the firm fee already paid by the predecessor recognised sole practice or recognised body in respect of each month between the date of authorisation of the licensed body and 31 October 2016.

Where a licensed body has succeeded to the part of the practice of a recognised sole practice or a recognised body the fee calculated shall be reduced as described above but the reduction shall relate to such proportion of the firm fee as the SRA shall determine taking into account any Notice of Succession or other information.

The firm fee will be increased by £200 for each branch office outside England and Wales. This additional fee forms part of the periodical fees for all authorised bodies and recognised sole practices.

C. Individual Compensation Fund contribution

A flat fee of £32 is payable by every individual who applies for:

a PC to commence on or after 1 November 2015, or

initial registration or renewal of registration as a REL or RFL to commence on or after 1 November 2015 irrespective of whether they hold client money. The exception to this is CPS from whom there is a statutory exemption from paying this contribution.

D. Firm Compensation Fund contribution

Every recognised sole practitioner

whose practice is to be treated as a recognised sole practice from 1 November 2015; and

that has held or received client money (as defined in the SRA Accounts Rules 2011) during the period 1 November 2014 to 31 October 2015,

shall pay a contribution of £548 to the Fund.

Annual periodical fees

Every recognised body that

provides the SRA with the required annual information report and periodical fees for the period 1 November 2015 to 31 October 2016; and

has held or received client money (as defined in the Solicitors Accounts Rules 2011) during the period 1 November 2014 to 31 October 2015

shall pay, with the annual periodical fee, a contribution of £548 to the Fund.

On first application

Every person or body who

applies for initial authorisation as a recognised sole practice or initial authorisation as a recognised body to commence during the period 1 November 2015 to 31 October 2016; and

intends to hold or receive client money (as defined in the SRA Accounts Rules 2011) at any time during the period 1 November 2015 to 31 October 2016

shall pay with the fee payable in respect of that application, a contribution to the Fund as follows:

The SRA may waive the contribution payable above in circumstances where the initial application is made by a body which is changing its legal status or is succeeding to the practice of another recognised body or recognised sole practitioner and the predecessor body or practitioner has already paid a contribution to the Compensation Fund.

E. Licensed body Compensation Fund contribution

On authorisation, licensed bodies will be required to pay a firm contribution calculated in the same way as for recognised bodies and recognised sole practices as set out in section D above.

Appendix 1 – Turnover definition

The following paragraphs describe how the turnover figure that will be used for the purposes of determining the firm fee should be calculated:

1. Turnover figure means a firm's total gross fees arising from work undertaken from offices in England and Wales.

Gross fees includes: all professional fees of the firm including remuneration, retained commission, and income of any sort whatsoever of the firm (including notarial fees). Work in Progress (WIP) should be included.

2. The turnover figures that will be used when billing firms in 2015 will be based on closed accounts, audited where possible.

Closed accounts are defined, in order of preference, as:

an audited set of financial statements

an unaudited set of financial statements signed off by an accountant

a submitted tax return for the year.

3. Bad debt should be handled under normal accounting procedures. Where it has been allowed for in the turnover figure for a firm's last closed accounting period prior to 1 November 2014, that is acceptable. If a bad debt has been discovered after closing the firm's accounts, then the turnover figure cannot be re-adjusted. Those adjustments could potentially be accounted for in the following year's closed accounts.

4. The turnover figure should, wherever possible, be for the last complete (12 months) accounting period prior to the 1 November 2014 (e.g. 31 March 2014). The latest acceptable annual accounting period end date is 31 October 2014.

5. The turnover figure should be an exact figure wherever possible. A figure rounded to the nearest £1,000 will be acceptable only if more detail is unavailable.

6. Those firms who do not have closed accounts which ended within the period from 1 November 2013 to 31 October 2014, should provide the SRA with an estimate of the turnover figure as well as the previous year's turnover figure based on accounts which have been closed. The SRA will determine at its discretion whether to use the 2013 figure if an updated 2014 figure based on closed accounts has not been received by 31 August 2015.

7. The turnover figure must be for a 12-month period.

(a) For a brand new firm (i.e. not a successor firm nor one resulting from change in status), an estimate for the first 12 months of practice (irrespective of whether this is after 31 October 2014) will be accepted; the basis upon which the firm has made the estimate should be provided to the SRA.

(b) If a firm has changed its annual accounting period, its latest closed accounting period prior to the 1 November 2014 will be shorter or longer than 12 months. The following approach should be used by the firm, providing an explanation of how they have derived their turnover figure:

preferably, provide the turnover for the 12-month period immediately preceding the new accounting period end date (as long as prior to 1 November 2014),

alternatively, if this is not possible then take the last closed accounts period prior to the 1 November 2014 and scale it appropriately (e.g. if the last closed accounting period was for six months then it should be doubled; if the last closed accounting period was for 15 months, then it should be divided by 15 and then multiplied by 12).

8. If a firm has a change in status (e.g. partnership to LLP, sole practice to partnership), then at renewal it should respond as if there were no change in status.

Appendix 2 – Successor turnover

Successor turnover is relevant where firms have changed through, for example, an acquisition, merger or split. Certain firms affected are required to submit a notice of succession to the SRA with an agreed apportionment of turnover among the affected firms.

As guidance successor turnover should be calculated based on the Turnover Figures for each of the affected firms.

If a firm has succeeded to the whole or a part of one or more firms (e.g. through merger or acquisition), successor turnover will be calculated by combining the appropriate proportion of the Turnover Figure for each of the affected firms which has become part of the successor practice:

in a simple merger between firms A and B, combine the Turnover Figures for each firm.

in a merger of one firm (firm A) with part of another firm (e.g. one third of firm B) then firm A should add the corresponding proportion of firm B's Turnover Figure to its Turnover Figure (e.g. firm A's Turnover Figure + third of firm B's Turnover Figure)

For a firm which has split or ceded part of their practice to another firm and wishes this change to be reflected in a successor turnover figure, the successor turnover figure will be a proportion of the Turnover Figure, as long as it is clear how the Turnover Figure for such a firm is to be distributed between the successor firms. 100 per cent of the Turnover Figure must be accounted for between the successor firms. For example:

in a merger of firm A with one third of firm B then firm B's successor turnover figure will be two thirds of its Turnover Figure, Firm A's will be its Turnover Figure plus one third of B's Turnover Figure;

where firm A and one third of firm B become new firm C, firm A's turnover will be £0 (closed) and B's turnover will be two thirds of its Turnover Figure. Firm C's successor turnover figures will be the combination of A's Turnover Figure and one third of firm B's.

In a case where all successor firms agree in the notice of succession on the apportionment of 100 per cent of the Turnover Figures, then the SRA will accept the successor turnover figures.

In the case where all successor firms are unable to agree the apportionment of 100 per cent of the Turnover Figures, then the SRA will treat the notice of succession as an application for it to determine the Turnover Figures for the purpose of determining renewal fees. The SRA will determine this apportionment based on the information available and its decision will be final. Firms will not be able to renew recognition without an appropriate successor turnover figure being determined, as this is necessary to calculate the appropriate firms' fees.